Johnson sees no cliff dive

Budget deal will spur growth in 2013, says finance firm chairman

Updated 10:49 pm, Thursday, November 29, 2012

Hugh Johnson offers his annual forecast at The Chamber breakfast on how the national economy, stock market and local economy will perform in the coming year. (Skip Dickstein/Times Union.
/ Times Union

Hugh Johnson of Hugh Johnson Advisors gives his annual forecast of the national, local economies and the health of the stock market at The Chamber breakfast at the Marriott in Colonie, N.Y. Nov 29, 2012. (Skip Dickstein/Times Union)

Hugh Johnson of Hugh Johnson Advisors gives his annual forecast of...

Hugh Johnson of Hugh Johnson Advisors gives his annual forecast of the national, local economies and the health of the stock market at The Chamber breakfast at the Marriott in Colonie, N.Y. Nov 29, 2012. (Skip Dickstein/Times Union)

Hugh Johnson of Hugh Johnson Advisors gives his annual forecast of...

Hugh Johnson of Hugh Johnson Advisors gives his annual forecast of the national, local economies and the health of the stock market at The Chamber breakfast at the Marriott in Colonie, N.Y. Nov 29, 2012. (Skip Dickstein/Times Union)

As a result, Johnson said, he expects the economy to continue expanding in 2013, although slowly.

"Republicans realize there has to be compromise. They're going to have to accept some tax-rate increases," he said, adding, "The Democrats are going to accept some spending cuts -— restructuring of Social Security, Medicare and Medicaid."

Changes in entitlements will be largely over cost-of-living adjustments, Johnson said.

Earlier in his talk, Johnson pointed out what fiscal restraint has done to European economic growth.

"If you superimpose fiscal restraint, fiscal austerity ... on a government in recession ... that is foolish," he said. "Conditions will get worse, not better," Johnson said, reminding the audience he had said that would happen during his chamber forecast last year.

Johnson reminded the audience that he had said at last year's event that the stock market would rise 14 percent this year. In fact, his forecast was too low, he said.

New York state's economy would track the nation's closely, Johnson said, with growth continuing in 2013, although at a slower annual rate. The Capital Region likely will see stronger job growth than it has, although it won't approach that of the state, he said. Locally, the strongest growth will occur in Saratoga County, he said.

Albany and Schenectady counties both will see negative job growth, both down 1.2 percent in 2013, while Rensselaer County will be up 0.3 percent and Saratoga County will see a gain of 0.8 percent.

Statewide, job growth will slow to 0.8 percent in 2013 from 1.5 percent this year, he forecast.

He said short-term interest rates likely would remain low.

"There are no significant pressures on the Federal Reserve to raise interest rates," Johnson said. Unemployment remained high and hourly earnings in the past year were up just 1.1 percent, "which is low," he added.

"Federal Reserve policy continues to be accommodative," he said. "The policy is responsive to underlying economic conditions and is also in my view humane."

And with a resolution to the threatened fiscal crisis in Washington, he remains optimistic.

"Generally speaking, I think we're heading towards a positive 2013," Johnson said. "It won't be an exciting 2013. But it will be single-digit gains and we'll all get back together next year and I think there's a good chance I'll say, I was low again."